Dramatically raise earnings on the ups and downs of the market allow borrowed funds, or leverage. Margin lending allows you to get money quickly and with maximum leverage, but the list of instruments used in these operations is limited. In repo transactions, which, in fact, are also lending, you can use a larger number of instruments, but the leverage will be less.
In the simplest case, potential George Soros can use margin lending. According to the standards Federal Service on financial markets(FFMS), the broker can provide the client with a margin leverage up to 1:3, that is, for a unit of own funds, the client receives three units of borrowed funds. However, the use of these funds is limited by the list of highly liquid shares approved by the FFMS (20 securities) in which it is allowed to invest. This list did not include liquid shares of Surgutneftegaz, HydroWGC, Uralkali, as well as a number of communications and ferrous metallurgy companies. In addition, brokers themselves often reduce the list to 10-15 securities.
In the case of a game to increase quotes, a loan is taken with money that is instantly invested in shares. When the expected price is reached, they are sold, part of the proceeds goes to repay the loan, and the difference between the purchase price and the sale price is the investor's profit. In the case of a game for a fall in quotes, a loan is taken with securities that are immediately sold on the market. Upon reaching the expected price securities are redeemed, returned to the broker, and the difference between the sale price and the purchase price remains with the investor. When receiving a margin loan, the investor does not receive either money or securities. He only gives an order to the broker to buy or sell the relevant securities in the amount of the loan. The rate on the provided loan will be 12-20% per annum, depending on the broker, the term and amount of the loan, although often a loan for one day is provided free of charge. The term of use of borrowed funds is unlimited.
Using leverage, an investor can increase the efficiency of his own funds by several times. For example, if 30 thousand rubles were taken for 10 thousand rubles of own funds. borrowed, then with a change in the value of assets by 10%, the profit will be 38.7%, or 3.87 thousand rubles. (excluding the broker's commission of 0.06% and 20% per annum for the loan). However, if the market drops that much, then the investor's losses will amount to 4.13 thousand rubles, or 41.3%.
Not every investor will be able to take advantage of the maximum leverage. According to the FFMS standards for clients with a high level of risk, that is, investors working on stock market at least six months with an amount of at least 600 thousand rubles, the limiting margin level, which allows you to take a loan with a leverage of 1:3, is 25%. For ordinary clients, it is 50%, which corresponds to 1:1 leverage. For experienced and ordinary investors, warning margin levels also differ, upon reaching which the broker informs about the need to deposit additional cash on account. Investors with a high level of risk are allowed to reduce the collateral to 17% margin, ordinary investors - up to 35%. If the collateral drops to a critical margin level, the broker may sell securities owned by the client without warning in order to avoid losses and cover his expenses. For ordinary clients, this level is determined by law at 25%, for clients with a high level of risk - 15%.
Given the high market volatility, brokers themselves do not recommend using the maximum leverage. "You should not take a leverage of more than 1:2, because otherwise a situation may arise when, as a result of the daily movement of quotations, the client's positions will be closed before he manages to add the required amount," he believes. CEO IK "KIT Finance" Sergey Zharov.
You can also get leverage through repo transactions. "Repo, in fact, is lending, and often brokers register margin transactions as repo transactions for ease of accounting," says Dmitry Turaev, a trader with the Baltic Financial Group. In a repo transaction, an investor sells a package of securities to a broker with an obligation to buy it back after a certain period of time. set price. With the proceeds, the investor can buy another package of securities, with which he also concludes a repo deal. And so on. Due to the chain of repo transactions, the leverage effect is achieved. The list of securities with which repo is allowed is wider than with margin lending. In addition to shares, it includes bills and bonds of Gazprom, Sberbank and other reliable issuers, government securities and some other instruments. The average contract period is two weeks, but can be extended to two months if the client wishes.
However, in practice, an investor using a chain of repo transactions cannot achieve a leverage effect exceeding 1:3. The main constraints are the cost of repurchase of securities and the discount to the market price with which securities are accepted as collateral for repo. The maximum discount (30-40% of the market price) is set for low-liquid shares, for "blue chips" it is 20-30%.
As in the case of margin lending, if the value of an asset drops to a critical level, the investor will be asked to add funds to collateral. "In the case of repo transactions with a 25% discount, if the discount drops to 10% due to the fall in the value of securities, the investor will be asked to restore the collateral, otherwise a decision may be made to sell the securities," Sergey Zharov notes. Brokers do not recommend using this leverage mechanism. "It may be cheaper than using a margin loan, but it is technically inconvenient to regulate the margin level," said Alexei Bazarov, head of the repo operations department at MDM Bank.
Vitaly Y-Gaidayev
REPO operations are quite common in banking environment. They are carried out in two stages. At the first stage, one side sells the second securities with the condition of their mandatory redemption after a certain period and at a certain price (this will be the second stage of the transaction).
That is, the obligation to repurchase is also an obligation to resell the securities. Key moment is that the repurchase price will be different from the original value of the securities. Accordingly, this difference will determine the income from the REPO transaction.
From an economic point of view, REPO transactions (from the English. repurchase agreement, repo) are nothing more than lending transactions. In the first stage, the lender who buys back the securities provides a loan to the seller of these securities. The securities themselves serve as collateral for the loan.
Transactions of this kind are used to obtain liquidity, or to obtain securities on short term. The demand for this kind of transactions is due to the fact that they are reliable and simple enough for participants.
The party that sells the securities borrows at a low interest rate for a short period of time. As for the buyer of securities, he provides credit and, thus, can make short-term investments in the presence of excess liquidity under collateral.
If a borrower(that is, the party that sells the securities) for some reason cannot fulfill the second condition of the contract - to buy back the securities on time and at a set price, creditor becomes their full owner with the possibility of selling securities on the market.
Therefore, REPO transactions are a very convenient tool and pose less risks for participants than, say, issuing a loan secured by securities. Naturally, this also affects interest rate. It goes down, which is very beneficial for the borrower.
The main participants are central and commercial banks . Moreover, some incorrectly believe that such transactions are possible only between the central and commercial banks.
Often, REPO transactions are carried out on the interbank market without the participation of the regulator.
REPO transactions can be classified in terms of maturity. In particular, they are divided into:
The timing of REPO transactions is also important for determining the rate. For example, if we are talking about intraday transactions, a fixed rate is applied here. As for open trades, it will be non-fixed and may be determined depending on the circumstances. Rates on futures transactions are set for the entire period of transactions.
Interest rates on loans in the interbank market are used as a starting point for determining rates. At the same time, the parties pay attention to the quality of securities and other conditions under which the transaction is carried out. Naturally, everything REPO transactions are secured (that is, securities are necessarily used as collateral). However, REPO transactions can be:
With regard to collateral for such transactions, it can be bonds that are the subject of purchase and sale transactions. However, it is worth remembering that securities that mature before the date of the second stage of REPO transactions cannot act as collateral for such transactions. Also, it is important to know that if the bonds belong to different issues, they also cannot be included in REPO transactions.
The following types of REPO transactions can also be classified:
What may arise during REPO transactions? First of all, incurring losses due to the failure of one of the parties to fulfill its obligations (which, in turn, may arise due to the default of the issuer). This applies specifically to the second part of the transaction, when the recipient of the loan must redeem the securities from the lender.
Among the most common reasons for this phenomenon, market factors can be noted.
For example, when the market prices for transferred assets rise, the lender may want to sell the assets themselves without completing the second part of the transaction. However, if quotes fall, the borrower may not be willing to reclaim their assets and meet their obligations in the second stage of the repo transaction.
On the other hand, we can say that the risks of both parties in REPO operations are insured. The seller of securities receives cash at his disposal. Even if the buyer does not want to return the securities, the seller does not lose everything, but only the assets, but in return he can dispose of the funds at his discretion. What
concerns the buyer in a repo transaction, he risks the funds issued as a loan secured by securities. His risks are also minimal, since in case of non-return of money, the buyer retains securities, the value of which, as a rule, is higher than the amount of funds that he gives under the REPO transaction.
How to manage risks in REPO transactions? There are generally accepted mechanisms that help the parties to accept additional conditions agreed before the conclusion of the transaction. These aspects include discounting and offsetting contributions.
Discount is an excess market value securities over the amount of funds issued under the REPO transaction.
In fact, this is the ratio that suits both sides when carrying out such an operation.
If the initial discount size is of great importance, the risks of the buyer are significantly reduced. However, they are not leveled, as the market value of securities may fall below the discount. There are situations when the discount is initially lower than the amount of funds issued. In such a situation, the risk of the seller of securities (the recipient of the loan) is insured.
How is the discount amount determined? This indicator is individual in each specific situation and depends on such parameters as the market value of securities, as well as their liquidity. The factors that affect the discount can also include the situation on the stock market as a whole, the timing of the transaction, the reliability of the parties, and so on.
In order to minimize risks, it is recommended to conduct transactions only if the securities have adequate liquidity. The discount can be minimal if the securities that are part of the so-called Blue Chips are offered as collateral.
As for stocks with low liquidity, here the discount level can be significantly higher and even reach 50 percent.
The change in the discount may occur under the influence of various market conditions. Therefore, the longer the period for which the transaction is concluded, the greater the risks for one of the parties. In order to minimize such risks, REPO operations provide for so-called compensatory contributions. They involve compensation by one of the parties of risks to the other party by making a special contribution.
For example, if securities rise in price on the market, the seller may demand compensation in monetary terms or the return of part of the securities. If the share price goes down, the buyer has the right to demand more securities to secure or return part of the money. It is important to understand that if one of the parties fails to fulfill its obligations under the compensation fee, the transaction is executed on the next trading day.
Compensatory contributions in such transactions became even more relevant after the events of 2008, when market participants were unable to fulfill their obligations.
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Order types
There is a certain sequence of actions for the broker to execute the client's orders received by the broker by phone, fax, mail or personal contact with the client. Regardless of the form of the received order, it must be documented in compliance with established standards.
Order types by price (market / limit / stop-order / stop-limit - order / execute or cancel / all or nothing).
Market Order - this is an order to a broker to buy or sell securities at the current market rate, i.e. buy at the seller's current offer and sell at the current bid price. In this situation, the broker is obliged to follow the principle of the best order placement in such a way that the buy order is executed at the lowest price, and the sell order is executed at the highest price in this trading system. Market orders in trading systems have the highest priority compared to all other orders, giving his client may not be sure at what price the order will be executed, but he can be completely sure of its obligatory execution.
Limit order - it is an order that sets the maximum execution price. A limit buy order sets the highest price the customer is willing to pay, and can be executed at a price not exceeding the limit price. A sell limit order sets the lowest price at which a client is willing to sell a security. A sell order can be executed at a price not less than the limit price.
Example. If the current share price is 52 and 50 is the limit price of a buy order, can a limit buy order be executed in this situation? Obviously no.
"Stop" - order - this is an order that becomes a market order as soon as some "stop" price is reached. If this is a sell order, then "stop" - the price must be below the market price at the time the order is transmitted, and vice versa, "stop" - the price must be above the market price at the time the buy order is transmitted.
Example. If the current share price is 50, then a "stop" order to buy shares for 55 can be executed if someone has made transactions at a price of 55 or more; and "stop" - an order to sell at 45 can be executed if someone has made transactions to sell at a price of 45 and below.
The disadvantage of this type of order is the uncertainty for the client regarding the price at which the transaction will be concluded, since the “stop” price determines the upper price limit for sell orders and the lower price limit for buy orders, which, in case of unfavorable market conditions, can lead to different results than the client intended.
Margined and unsecured transactions.
A large number of professional participants in the securities market licensed to carry out brokerage activities offer their clients such types of services as margin and unsecured transactions.
Margin trades transactions of purchase and sale of securities are recognized, the settlement of which is made using cash or securities provided by a broker on a loan to a client.
Under unsecured transaction is understood as a transaction of purchase and sale of securities (with the exception of futures transactions concluded on the stock exchange), which simultaneously satisfies the following conditions:
made at the trades of the trade organizer (including when, in accordance with the trading rules, the conclusion of trades on the basis of orders is carried out with a clearing organization) on the terms of clearing with full collateral and/or on the terms of fulfillment of obligations under the trade on the day of its conclusion;
at the time of the transaction, the amount of cash accounted for in the account for internal accounting of settlements with the client in cash, or the number of securities recorded in the account for internal accounting for settlements with the client in securities, futures contracts and options, taking into account the rights of claim and obligations to pay cash funds and the supply of securities on previously concluded transactions, the fulfillment of obligations on which must be completed no later than the end of the current business day and/or those made at the trades of the trade organizer (including when, in accordance with the trading rules, the conclusion of trades on the basis of orders is carried out with a clearing organization) on clearing terms with full collateral, minus certain cash/securities, is not enough to fulfill the obligations under such a transaction.
A broker performing margin and/or unsecured transactions in the interests of clients is obliged to:
develop a comprehensive and complete declaration of risks that may arise as a result of marginal and / or unsecured transactions, and familiarize all clients with it, while the fact of familiarization must be confirmed by the client's signature;
use automated system calculation of the margin level, the value of the collateral and the client's RFP, which ensures control over the excess of the value of the collateral over the client's RFQ, as well as the compliance of the margin level and R1 and R2 standards with the requirements established by the federal executive body for the securities market;
appoint an official responsible for monitoring the risks arising from marginal and/or unsecured transactions and ensuring information interaction with all clients in whose interests marginal and/or unsecured transactions are made.
Margin loan amount
In order to protect the interests of clients and ensure the financial stability of brokers, the FFMS limits the amount of borrowed funds used to complete a transaction. At the same time, clients are divided into categories - for ordinary clients, the leverage should be no more than 1 to 1. For clients with an increased level of risk, a higher risk is allowed and their leverage is 1 to 3.
Margin level - is the ratio of the value of the client's liquid funds, reduced by the amount of the client's debt to the broker, to the value of the client's liquid funds.
The level of margin, along with the amount of collateral, is a key indicator used by the broker to manage risk. The margin level is defined as follows:
UrM \u003d ((DSC + CCB - CCB) / (DSC + CCB))x 100%, where
URM - margin level;
CCB - the value of the client's liquid securities at the broker's disposal;
ZKB - the client's debt to the broker.
When calculating the margin level at the conclusion of a transaction, the indicators of DSC, SCB and CCB are used in the values acquired by them after the conclusion of such a transaction (as if it had been concluded).
MA = 50% margin limit, if a higher margin limit is not provided for in the contract with the client (for a client with a higher risk level, the margin limit MA = 25)
MA 35% The broker must send a notification of the delivery of funds, in case more than high level the margin for sending a claim is not provided for in the agreement with the client (for a client with an increased risk level UM 25%).
MA 25% (minimum allowable margin level), the broker is obliged to sell part of the client's assets before raising the MA 35%
Execution of margin transactions, the sale by a broker of securities that constitute collateral for the client's obligations, as well as the purchase of securities at the expense of the client's funds that constitute collateral for the client's obligations, in order to levy a recovery on funds and / or securities that serve as collateral for the client's obligations, in cases stipulated by the legislation of the Russian Federation on securities, allowed only on the stock exchange and/or through other organizers of trading on the securities market who have an appropriate license from the federal executive body for the securities market (hereinafter referred to as trade organizers).
Since the execution of margin transactions is allowed only at the auctions of the trade organizer, the trade organizer has the right to establish a higher restrictive margin level and the margin level at which the client is sent the requirements for depositing funds, which are mandatory for compliance by the participants in the trade, than the levels established by the federal executive body for the securities market.
Every day at the end of trading, the broker performing margin transactions submits a report to the trade organizer about each client, the margin level, according to which, as of the expiration of the first hour of the main trading session of the previous trading day of the corresponding trade organizer and / or at the end of the main trading session of the previous trading day, of all trade organizers through which transactions are carried out in the interests of the client, was less than 100%.
The report must contain:
the name or unique code (number) of the client assigned by the broker;
margin level and R2 ratio after the first hour of the main trading session of the previous trading day of the relevant trade organizer and at the end of the main trading session of the previous trading day on all trading organizers through which transactions are carried out in the interests of the client;
The report is submitted no later than the second hour after the start of the main trading session of the trade organizer.
When making margin transactions, a professional participant in the securities market, in addition to calculating the margin level, calculates two more coefficients:
R1- maximum value debts of all clients to the broker
R1 = Zk/CCb + SRK, where
Zk - the amount of debt of all clients to the broker;
CCb - the broker's own funds, calculated in accordance with the methodology established by the legislation of the Russian Federation on securities;
IBS - the total amount of credits (loans) provided to the broker in order to increase the broker's funds used in settlements on margin and unsecured transactions. At the same time, only credits (loans) are taken into account as part of this value, the agreements on the provision of which meet the following conditions:
the term for granting a loan (a loan issued in cash) is at least 1 year;
the credit (loan) is not claimed by the creditor before the expiration of the validity period, except in cases of a material breach by the broker of the terms of the contract, as well as in other cases provided for by federal laws as grounds for terminating or amending the contract at the request of one of the parties on the basis of a court decision;
payment of the principal amount of the debt occurs after the expiration of the contract at a time.
Coefficient standardsR1:
for brokers whose own funds are 10 million rubles or less, no more than 2;
for brokers whose own funds are more than 10 million rubles - no more than 3.
R2 - the maximum loan amount of one client to the broker
R2 = Zk / Ssb + SRK 0.25, where
Zk - debt of one client to a broker .
Calculation periods R 1 and R 2:
R1 - calculated at the end of trading for all clients
R2 - calculated 2 times a day:
1 hour after the opening of trading
at the close of trading.
Example: The total amount of loans granted to the broker is 10,000,000 rubles. The broker's own funds, calculated in accordance with the methodology established by the legislation of the Russian Federation on securities, amount to 50,000,000 rubles. Determine the maximum amount that one client can owe to the margin broker.
Periods for calculating the margin level (ML):
The broker has the right to independently calculate the walrus level for each client in the following cases:
when concluding a transaction in the interests of the client;
an hour after the opening of the trade organizer's trading day;
in the event of a significant (by 2 percent or more) deviation in the price of a security accepted by the broker as collateral from the price of the previous calculation of the margin level (except for cases when such deviation in the price of a security occurred after the end of the main trading session of the current trading day);
at the time of the end of the auction at the organizer of the trade.
When calculating the level of the client's margin in connection with the provision of securities by him to the client, the market value of the securities is taken equal to the price of the last purchase and sale transaction of the same type (type) of securities, recorded in the trade organizer's system.
Securities with which you can make margin transactions
Margin transactions may not be performed with all securities. Through margin transactions, legislation will be allowed buy only those securities that are admitted to trading by at least one trading organizer, and sell only those securities that meet the liquidity criteria established by the FFMS of Russia.
The broker is not entitled to make a marginal and unsecured transaction for the sale of securities at a price 5% lower than the closing price of the previous trading day, set by the trade organizer for the same security.
When the margin level drops below the margin level for the first time during the trading day to send a claim, the broker must send a deposit request to the client. If the margin level falls below the margin level again within one trading day to send a request, the broker has the right not to send a repeated request to the client to deposit funds.
A broker performing margin and unsecured transactions in the interests of clients is obliged to ensure separate accounting of margin and unsecured transactions made by him in relation to each client, including:
Accounting for the amount of obligations of each client arising from the commission of margin transactions and unsecured transactions by the broker;
Accounting for requests sent to the client for the client to deposit funds or securities in an amount sufficient to increase the level to the limiting margin level;
Accounting for transactions involving the sale by a broker of securities constituting collateral for the client's obligations, as well as transactions for the purchase of securities at the expense of the client's funds constituting collateral for the client's obligations, in order for the broker to recover funds and / or securities serving as collateral for the client's obligations, in cases stipulated by the legislation of the Russian Federation on securities, including these Rules.
Assigning customers to the category of customers with an increased level of risk.
A client may be classified by a broker as a high-risk client, provided that:
contract for the provision brokerage services, concluded between the broker and the client, provides for the commission by the broker in the interests of this client of margin transactions with a restrictive margin level of at least 25%, a margin level for sending a claim of at least 20%;
until the moment the broker classifies the client as a high-risk client, the client must use brokerage services in the securities market for at least 6 months immediately preceding the date the broker decides to classify the client as a high-risk client, and within 3 months immediately preceding the date of the broker's decision to classify the client as a high-risk client, margin and/or unsecured transactions were made in the interests of this client;
the amount of the client's assets according to the broker's internal accounting is at least 600,000 rubles;
the amount of the broker's own funds to be at least 100,000,000 rubles.
The broker has the right not to classify the client as a high-risk client even if the client complies with all the requirements for such a category established by the federal executive body for the securities market.
The broker has the right to exclude a client from the category of clients with an increased level of risk on the following grounds:
at the request of the client himself, submitted in writing, unless another type of request is provided for in the contract by the client with an increased level of risk;
in cases stipulated by the agreement about brokerage services concluded between a client with a high level of risk and a broker.
The broker is obliged to exclude the client from the category of clients with an increased level of risk from the next business day following the day when, in accordance with the legislation of the Russian Federation on securities, he sold securities belonging to the client that constitute collateral, or purchased securities at the expense of the client's funds collateral, in an amount sufficient to repay part of the loan, without a corresponding order from the client, (that is, if the broker has sold securities owned by the client, constituting client collateral at a margin level below 15%) and is not entitled to apply to to such a client, the margin levels and the amount of the discount provided for in paragraph 6 of this Procedure.
A professional participant maintains a register of clients with an increased level of risk (hereinafter referred to as the Register), in which he is obliged to enter information about such clients.
The client is considered to be categorized by the broker as high-risk clients from the moment the broker makes an entry on its inclusion in the Register.
The Register must contain the following information about a high-risk client:
surname, name, patronymic for an individual or full name for a legal entity;
client code assigned by the broker;
number and date of the contract for brokerage services;
date of making an entry about a client with an increased risk level in the Register;
date of exclusion of a client with an increased risk level from the Register;
the reason for exclusion of a high-risk client from the Register;
date of re-inclusion of a client with an increased risk level in the Register;
reason for re-inclusion of a client with an increased risk level in the Register.
If the broker's own funds become less than 100,000,000 rubles, and also if the amount of the client's assets, according to internal accounting data, becomes less than 600,000 rubles, the broker is not entitled to conclude a transaction, as well as perform a transaction with cash and / or securities, leading to a change in the balance of the client’s internal accounting account for cash and/or securities, and/or the internal accounting account for cash and/or securities settlements with the client, resulting in a decrease in the margin level below 50%, as well as leading to a decrease margin level if the margin level is below 50%, unless a higher limiting margin level is provided for in the agreement with the client, except for settlements on previously concluded transactions.
Securing the return of a margin loan
The broker issues a margin loan only if the broker has cash or securities of the client, which can serve as collateral for the repayment of the loan.
Not all securities, but only those securities that meet the following liquidity criteria, may be accepted as collateral for the client's obligations under the loans provided by the broker:
listed on the stock exchange
the final share of a security calculated according to the Methodology for Compiling the List of Liquid Securities (Appendix to these Regulations), based on the results of trading on the stock exchange for the last reporting quarter, exceeds 10%.
You can find out about such securities on the website of the exchanges. However, the broker has the right to accept as collateral not all, but only some of the securities included in the list of the exchange. It is important that the broker has the right to change the list of liquid securities that he accepts as collateral, in this case, the client may be forced to deposit new collateral: cash or other securities. This can happen, for example, if a security is canceled as a result of a conversion. In this case, the broker is obliged to notify the client in advance of the corresponding change.
Organizers of trading in the securities market quarterly compile a list of liquid securities
The list of liquid securities becomes obligatory from the 15th business day following the reporting quarter.
Collateral valuation
In order to control the value of collateral for a client's obligations to a broker, the securities constituting the collateral are subject to ongoing valuation. The value of the securities is taken equal to the price of the last at the time of calculating the margin level (collateral value) of the securities purchase and sale transaction recorded in the trade organizer's system, in which the broker is a trading participant. At the same time, the securities constituting the collateral are valued by the broker at a certain discount (discount). The minimum discount set by the regulations of the Federal Financial Markets Service is 15% of the market value of securities for high-risk clients, and 25% for persons who are not high-risk clients. A larger discount can be established by the broker's agreement with the client.
The collateral is evaluated according to the formula:
VO \u003d (DSK + SCB) x (1-discount / 100%), where
VO - amount of collateral (calculated in rubles);
DSK - the client's funds at the disposal of the broker;
CCB - the value of the client's liquid securities at the broker's disposal.
Example: At the time the broker requested the client to deposit funds or securities in an amount sufficient to increase the level to the limiting margin level, the client's debt to the broker was 24,000,000 rubles and the margin level was 35%. Determine the amount of customer collateral.
When making marginal and/or unsecured transactions through two or more trade organizers, the broker has the right to independently determine the trade organizer whose securities transactions registered in the trading system are accepted by the broker when calculating the amount of collateral, the margin level and the client's debt to the broker.
The broker should sell only that portion of the securities that will help restore the margin level to the call margin, but market conditions may cause the broker to sell slightly more securities. The broker has the right, at its discretion, to choose for sale any securities that serve as collateral. The sale of securities collateral for the repayment of a margin loan often takes place in a “falling” market at unfavorable prices for the client. As a result of the sale of securities collateral for the return of a margin loan, the client may incur losses even as a result of short-term market fluctuations - despite the fact that market prices will recover or even rise soon after. A margin position should not be left “unattended” for a long time. It is necessary to monitor the margin level, broker messages, market movements. In this case, the “buy and forget” investment strategy is unacceptable.
« Transfer" positions
“Transfer” of a position implies that the broker that issued the loan carries out REPO transactions in the interests of the client in order to increase the margin level (when making the first part of the REPO transaction) with subsequent restoration of the initial margin level (completing the second part of the REPO transaction). “Rollover” of a position is allowed by the regulations of the Federal Financial Markets Service and, as a rule, is performed to provide the client with securities and funds necessary for settlements on concluded transactions, as well as to comply with legal requirements for the margin level.
A REPO transaction consists of two parts - on the basis of the first, in the interests of the client, the broker buys or sells securities, and on the basis of the second, he performs an operation opposite to the first, i.e. sells or buys securities. The first part of the REPO transaction is executed on the day of its execution, as a result of which the client acquires a certain asset (money / securities) and returns the debt to the broker, and the second part of the REPO transaction is executed on the next day, as a result of which the client returns the asset received under the first part of the transaction REPO, for which the broker provides him with a loan.
At the same time, on open market The Bank of Russia conducts direct REPO operations. A direct REPO transaction is a REPO transaction with a blocking of collateral, in which the seller of the bonds in the first part and the buyer of the bonds in the second part is a credit institution, and the buyer of the bonds in the first part and the seller of the bonds in the second part is the Bank of Russia. Only the following can be used as collateral for such transactions: government short-term bonds; federal loan bonds; bonds of external bond loans; bonds of the Bank of Russia.
Example: As of August 25, 2007, the client's debt to the broker on a margin loan amounted to 400,000 rubles. The client had 40,000 X securities in collateral that met the liquidity criteria. On August 28, 2007, the client must execute the 2nd part of the REPO transaction for the purchase of 20,000 units. shares of X at a price of 20 rubles. Calculate the margin level at the beginning of the day, provided that the current price of shares X was 22 rubles, and the closing price of the previous day was 21 rubles.
Taxation of REPO transactions
For legal entities:
buyer for the first part of the REPO transaction, then the positive difference between the sale price for the second part of the REPO and the acquisition price for the first part of the REPO is recognized as income for tax purposes and is recognized as income in the form of interest on the placed funds.
If entity is seller for the first part of a REPO transaction, then the negative difference between the acquisition price of the second part of the REPO and the sale price of the first part of the REPO is recognized as income in the form of interest on a loan provided by securities.
For individuals:
If individual is seller for the first part of a REPO transaction, then for tax purposes the REPO transaction is recognized as a pair of two unrelated securities purchase and sale transactions.
REPO TRANSACTIONS TO CARRY OFF THE CLIENT'S SHORT POSITION IN SECURITIES
mode of exchange trading with T+4 settlements on the MICEX SE, these terms and provisions are carried out jointly only for FORTS MICEX-RTS.
Cash in the amount sufficient to pay for the securities corresponding to the Buy position opened by the Client;
